M Sandal (Service) 09 December 2008

Deduction of intrest u/s 24

Pl clarify if interest on borrowings other than specific housing loans like personal loans used for repairs of own house are eligible for deduction as property loss ( self occupied property) u/s 24
If yes, can it be taken in account by the DDO/Employer
If yes, can Audit ask for proof or disallow it and ask for return/refund?

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6 Replies

Mahesh V.P. (Advocate) 06 January 2009

As per Proviso to Sec 24., which states as :-

Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

Explanation.For the purposes of this proviso, the expression new loan means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.

Thus, it is nowhere mentioned that you can not claim Interest paid to Personal Loan under Sec.24, It is up to the assessee to prove that the personal loan was used for construction of the house. You have to keep the following ready

01. Certificate of interest on Loan

02.Proof of construction, such as bills used for purchase of materials for construction.

All this is not necessary if you take a housing loan from a bank, It becomes the duty of the Bank to ensure that the funds released is used for construction and ITO will admit a certificate for intrest the final proof.

For the second part of your question, When deducting tax, your employer acts as the agent of Govt and has the Power and responsibilities of ITO.

M Sandal (Service) 22 January 2009

Thanks for the clarifications.given . In case of intrest upto Rs30,000 ionly, i am of the view that prima facie only that proof /document can be demanded by the DDO/Employer which is specified in the Act. viz first proviso to Sec 24, 192 and CBTD Circular.

Accordingly, as per first proviso - no intrest certificate is reqd for repairs upto Rs30,000, for TDS under Sec192 and CBTD Circular , only self declaration/particulars are required to be furnished to the employer/DDO for taking into account the intrest income/loss.

Intrest certificate is required in terms of second proviso for intrest beyond s30,000 towards construction cost.

I solicit your views in the matter.

A V Vishal (Advocate) 26 January 2009

24. Income chargeable under the head Income from house property shall be computed after making the following deductions, namely:

(a) a sum equal to thirty per cent of the annual value;

(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :

Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed ⁴[within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees.

Explanation.Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:]

⁵[Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

Explanation.For the purposes of this proviso, the expression new loan means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.]

M Sandal (Service) 26 January 2009

I have recd only reproduction of S/24. It seems your views have missed. Pl confirm my views ( para 2).Thanks.

A V Vishal (Advocate) 26 January 2009

Dear Sandal:

Pl clarify if interest on borrowings other than specific housing loans like personal loans used for repairs of own house are eligible for deduction as property loss ( self occupied property) u/s 24

Ans: You can claim provided you can prove such loan was used for purpose of repairs/renovations of own house.

2.If yes, can it be taken in account by the DDO/Employer :

Ans: Yes

3.If yes, can Audit ask for proof or disallow it and ask for return/refund?

Ans: Please be specific about this point, which audit and refund of what?

VINAY AGRAWAL (MANAGER) 23 May 2009

Can anyone please guide on following situation:

Suppose bank has provided credit facilities (Cash Credit) to a company and the said facilities are utilised for construction of a property which is let out as well as its other projects and administrative expenses. The income from let out property is reflected under Income from House property.

In such situation following complications can arise:

1) Bank may not be inclined to give a certificate specifing interest on let out property as the funds are not exclusively utilised for construction of let out property. Further bank has granted credit facilities not for any specific project but companys all projects as well.

2) Can it be worked out an interest proportionate to the let out property calculated on actual payments made from the credit facilities account and claim it in section 24 in absense of any specific certificate from bank specifying the proportionate interest amount?

Please Guide,

Thanks

Vinay

Mob: 9374610940

agrawalvinayr@gmail.com

alternate id: vinay@goyalco.com